Execution Copy
EXHIBIT 99.1
CONVERSION AND EXCHANGE AGREEMENT
This Conversion and Exchange Agreement (the "AGREEMENT") is entered into as
of August 6, 2002, by and among PrimeSource Healthcare, Inc., a Massachusetts
corporation (the "Company"), and the persons listed in the signature pages
hereto (collectively, the "Signatories" and each individually, a "SIGNATORY").
R E C I T A L S
WHEREAS, the Company wishes to reconstitute its capital structure through
(a) the conversion of its outstanding Series C Convertible Preferred Stock, par
value $1.00 (the "SERIES C PREFERRED"), into the Company's Common Stock, par
value $0.01 (the "COMMON STOCK"), on a 1 to 27.5871 basis; (b) the conversion of
its outstanding Series F Convertible Redeemable Preferred Stock, no par value
(the "SERIES F PREFERRED"), into the Common Stock on a 1 to 1.00 basis; and (c)
the exchange of its Series E Convertible Preferred Stock, no par value (the
"SERIES E PREFERRED"), into its newly created Series G Convertible Redeemable
Preferred Stock, no par value (the "SERIES G PREFERRED"), on a 1 to 0.3125
basis;
WHEREAS, the Signatories (constituting the required percentages of the
holders of Series C Preferred and Series F Preferred, pursuant to the Company's
Articles of Organization) desire to convert all of the outstanding shares of
Series C Preferred and Series F Preferred into Common Stock in accordance with
the Company's Articles of Organization and as set forth above;
WHEREAS, each of the holders of Series E Preferred desires to exchange its
shares of Series E Preferred into shares of Series G Preferred as set forth
above;
WHEREAS, immediately after the consummation of the Exchange Transaction (as
defined herein), the Company desires to reprice certain warrants; and
WHEREAS, in further consideration of the conversions and exchanges referred
to in the foregoing paragraph, the Company will issue the holders of the Series
C Preferred (the "SERIES C STOCKHOLDERS"), the holders of the Series F Preferred
(the "SERIES F STOCKHOLDERS") and the holders of the Series E Preferred (the
"SERIES E STOCKHOLDERS" and together with the Series C Stockholders and the
Series F Stockholders, the "PREFERRED STOCKHOLDERS") a certain number of
warrants to purchase shares of Common Stock as set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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ARTICLE I
CONVERSION, EXCHANGE AND REPRICING
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1.1 CONVERSION TRANSACTIONS.
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(a) At the Conversion Effective Time (as defined below), each
share of Series C Preferred issued and outstanding immediately prior to the
Conversion Effective Time will convert into shares of Common Stock, on a 1 to
27.5871 basis (the "SERIES C CONVERSION TRANSACTION"), pursuant to Section 5(o)
of the Certificate of Vote of Directors establishing the Series C Preferred.
Following the Conversion Effective Time, all shares of Series C Preferred shall
no longer be outstanding. Each Signatory acknowledges and agrees that any rights
it may have in respect of the Series C Preferred, including but not limited to
the rights to receive accrued but unpaid dividends on the Series C Preferred,
shall be terminated and cease to exist effective as of the Conversion Effective
Time.
(b) At the Conversion Effective Time (as defined below), each
share of Series F Preferred issued and outstanding immediately prior to the
Conversion Effective Time will convert into shares of Common Stock, on a 1 to 1
basis (the "SERIES F CONVERSION TRANSACTION" and collectively with the Series C
Conversion Transaction, the "CONVERSION TRANSACTIONS"), pursuant to Section 5(o)
of the Certificate of Vote of Directors establishing the Series F Preferred.
Following the Conversion Effective Time, all shares of Series F Preferred shall
no longer be outstanding. Each Signatory acknowledges and agrees that any rights
it may have in respect of the Series F Preferred, including but not limited to
the rights to receive accrued but unpaid dividends on the Series F Preferred,
shall be terminated and cease to exist effective as of the Conversion Effective
Time.
1.2 EXCHANGE TRANSACTION. At the Exchange Effective Time (as
defined below), each share of Series E Preferred issued and outstanding
immediately prior to the Exchange Effective Time will convert into a fraction of
a share of Series G Preferred, on a 1 to 0.3125 basis (the "EXCHANGE
TRANSACTION"); PROVIDED, HOWEVER, that in no event shall the Exchange
Transaction occur unless the Conversion Transactions have been consummated in
accordance with this Agreement. Following the Exchange Effective Time, all
shares of Series E Preferred shall no longer be outstanding. Each Signatory
acknowledges and agrees that any rights it may have in respect of the Series E
Preferred, including but not limited to (i) any rights to receive accrued but
unpaid dividends on the Series E Preferred and (ii) any rights under "Adjustment
of Price Upon Issuance of Common Stock" under Section 5(d) of the Certificate of
Vote of Directors establishing the Series E Preferred with respect to the
consummation of the Conversion Transaction and the issuance of the Conversion
Warrants (as defined below), shall be terminated and cease to exist effective as
of the Exchange Effective Time.
1.3 THE CONVERSION EFFECTIVE TIME. The Conversion Transactions
shall occur at 11:30 a.m. Pacific Standard Time (the "CONVERSION EFFECTIVE
TIME") on August 6, 2002 (the "CLOSING DATE") and shall be held at the offices
of Xxxxxx, Xxxx & Xxxxxxxx LLP at 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000.
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1.4 THE EXCHANGE EFFECTIVE TIME. If the Conversion Transactions
have been consummated in accordance with this Agreement, the Exchange
Transaction shall occur at 12:00 p.m. Pacific Standard Time (the "EXCHANGE
EFFECTIVE TIME") on the Closing Date and shall be held at the offices of Xxxxxx,
Xxxx & Xxxxxxxx LLP at 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
1.5 ISSUANCE OF CONVERSION WARRANTS. In further consideration of
the holders of the Series C Preferred and the Series F Preferred converting
their respective shares pursuant to the Conversion Transactions, immediately
after the Conversion Effective Time, the Company shall issue to such holder the
following number of warrants to purchase Common Stock, pursuant to warrant
agreements substantially in the form attached as EXHIBIT A (each, a "WARRANT"):
(a) each Series C Stockholder shall be issued its pro rata share
of warrants (the "SERIES C WARRANTS") to purchase an aggregate of
7,390,614 shares of Common Stock; and
(b) each Series F Stockholder shall be issued its pro rata share
of warrants (the "SERIES F WARRANTS" and together with the Series C
Warrants, the "CONVERSION WARRANTS") to purchase an aggregate of
1,614,560 shares of Common Stock.
1.6 ISSUANCE OF EXCHANGE WARRANTS. In further consideration of
each of the holders of the Series E Preferred exchanging their respective shares
pursuant to the Exchange Transaction, immediately after the Exchange Effective
Time, the Company shall issue to such holder its pro rata share of warrants to
purchase 817,000 shares of Common Stock (the "EXCHANGE WARRANTS"), pursuant to a
Warrant.
1.7 DELIVERIES IN CONNECTION WITH THE CONVERSION TRANSACTIONS. On
the Closing Date:
(a) The Company shall deliver (i) to each Series C Stockholder a
Signatory hereto, stock certificates evidencing the shares of Common Stock to be
issued in the Series C Conversion Transaction and a Warrant evidencing its pro
rata share of the Series C Warrants and (ii) to each Series F Stockholder a
Signatory hereto, stock certificates evidencing the shares of Common Stock to be
issued in the Series F Conversion Transaction and a Warrant evidencing its pro
rata share of the Series F Warrants.
(b) (i) Each Series C Stockholder a Signatory hereto shall
deliver to the Company stock certificates evidencing their respective shares of
Series C Preferred to be converted pursuant to the Series C Conversion
Transaction and (ii) each Series F Stockholder a Signatory hereto shall deliver
to the Company stock certificates evidencing their respective shares of Series F
Preferred to be converted pursuant to the Series F Conversion Transaction.
1.8 DELIVERIES IN CONNECTION WITH THE EXCHANGE TRANSACTION. On the
Closing Date:
(a) The Company shall deliver to each Series E Stockholder a
Signatory hereto, stock certificates evidencing the shares of Series G Preferred
to be issued in the Exchange Transaction and a Warrant evidencing its pro rata
share of the Exchange Warrants.
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(b) Each Series E Stockholder a Signatory hereto shall deliver to
the Company stock certificates evidencing their respective shares of Series E
Preferred to be exchanged pursuant to the Exchange Transaction.
1.9 SUBSEQUENT DELIVERIES. At any time after the Conversion
Effective Time, upon receipt by the Company of stock certificates evidencing the
shares of Series C Preferred and/or Series F Preferred from a Preferred
Stockholder not a Signatory hereto, the Company shall deliver stock
certificate(s) evidencing shares of Common Stock converted pursuant to the
Series C Conversion Transaction and/or the Series F Conversion Transaction, as
applicable, and a Warrant evidencing the applicable Conversion Warrants to such
Preferred Stockholder.
1.10 REPRICING TRANSACTION. Immediately following the Exchange
Effective Time, the Company shall adjust the purchase price, from $1.68 to $0.01
per share, of those certain warrants to purchase an aggregate of 140,330 shares
of Common Stock which were issued by PrimeSource Surgical, Inc. to Webbmont
Holdings, L.P., Xxxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxx in
connection with the issuance by PrimeSource Surgical, Inc. of Series B-3
Convertible Preferred Stock and which are exercisable for an aggregate of
140,330 shares of Common Stock.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 CORPORATE POWER. The Company has the corporate power and
authority (i) to execute, deliver and perform its obligations under this
Agreement, the shares of Common Stock and Series G Preferred to be issued
pursuant to this Agreement (collectively, the "CONVERSION AND EXCHANGE SHARES"),
and the Conversion Warrants and the Exchange Warrants (collectively, the
"CONVERSION AND EXCHANGE WARRANTS"); (ii) to issue, sell and deliver the
Conversion and Exchange Shares and the Conversion and Exchange Warrants upon the
consummation of the transactions contemplated hereby; and (iii) to issue and
deliver the shares of Common Stock issuable upon conversion of the Series G
Preferred (the "CONVERSION SHARES") and exercise of the Conversion and Exchange
Warrants, in each instance, in accordance with the terms of the Series G
Preferred and the Conversion and Exchange Warrants, respectively.
2.2 AUTHORIZATION OF AGREEMENT.
(a) The execution and delivery by the Company of this Agreement,
the performance by the Company of its obligations under this Agreement, and the
issuance, sale and delivery of the Conversion and Exchange Shares and the
Conversion and Exchange Warrants have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Articles of Organization of the
Company, as amended through the date hereof, (the "ARTICLES OF ORGANIZATION"),
the By-Laws of the Company, or any provision of any indenture, agreement or
other instrument to which the Company, any of its subsidiaries, or any of their
respective properties or assets is bound, or conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument, or result in the creation or
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imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company or any of its
subsidiaries.
(b) The Conversion and Exchange Shares have been duly authorized,
and when issued in accordance with this Agreement, will be validly issued, fully
paid and nonassessable shares of Common Stock and Series G Preferred, as
applicable, with no personal liability attaching to the ownership thereof and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in this
Agreement.
(c) The Conversion Shares and the shares of Common Stock issuable
upon exercise of the Conversion and Exchange Warrants (the "EXERCISE SHARES"),
when issued in accordance with their respective terms, and assuming that the
Articles of Organization of the Company shall have been amended prior to
exercise and/or conversion to authorize a sufficient number of shares of Common
Stock for the purposes of such exercise and/or conversion, will be duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
with no personal liability attaching to the ownership thereof and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
by or through the Company except as set forth in this Agreement.
(d) None of the issuance, sale or delivery of the Conversion and
Exchange Shares or the Conversion and Exchange Warrants is subject to any
preemptive right of stockholders of the Company or to any right of first refusal
or other right in favor of any person that has not been effectively waived.
Neither the issuance or delivery of the Conversion Shares or the shares of
Common Stock issuable upon exercise of the Conversion and Exchange Warrants is
subject to any preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person that has not been
effectively waived.
2.3 This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject in each case as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights of creditors generally).
ARTICLE III
CONDITIONS
The obligation of each Signatory to effectuate the transactions
contemplated by this Agreement is, at its option, subject to the satisfaction,
on or before the Closing Date of the following conditions:
(a) OPINION OF THE COMPANY'S COUNSEL. Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP, counsel for the Company, shall have issued an opinion, dated as of the
Closing Date, in substantially the form attached as EXHIBIT B hereto.
(b) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in ARTICLE II hereof shall be true,
complete and correct on and as of the Closing Date, and the President and Chief
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Financial Officer of the Company shall have certified to such effect in writing
on the Closing Date.
(c) CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING THE CLASS OF SERIES
G CONVERTIBLE PREFERRED STOCK. The Certificate of Vote of Directors establishing
the Series G Preferred (the "SERIES G CERTIFICATE OF VOTE"), a copy of which is
attached hereto as Exhibit C, shall have been filed with the Secretary of the
Commonwealth of Massachusetts.
ARTICLE IV
MISCELLANEOUS
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4.1. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the state of New York without regard to provisions
regarding choice of laws.
4.2. COMPANY'S COVENANT. Prior to December 31, 2002 the Company
shall call and hold a meeting of its stockholders (the "DECEMBER STOCKHOLDERS
MEETING") and shall use its best efforts to cause an increase in the Company's
authorized Common Stock such that the total number of shares of Common Stock
authorized will be sufficient to effect issuance of the Exercise Shares and the
Conversion Shares and/or otherwise to comply with the terms of this Agreement
and of the Series G Certificate of Vote with respect to the terms, rights and
privileges of the Series G Preferred. After the December Stockholders Meeting
the Company shall, at all times, reserve and keep available at least 9,822,174
(or such other lower number as is at any time determined to be a definite
maximum number of shares of Common Stock for which the Conversion and Exchange
Warrants may be exercised) unissued shares of Common Stock, for the purpose of
effecting the issuance of the Exercise Shares and otherwise complying with the
terms of this Agreement. Additionally, with respect to the shares of Series G
Preferred issued hereunder, the Company shall, at all times after the December
Stockholders Meeting, reserve and keep available at least an aggregate of
12,000,000 unissued shares of Common Stock, for the purpose of effecting a
conversion of such shares of Series G Preferred to Common Stock in accordance
with the Series G Certificate of Vote. If at any time after the December
Stockholders Meeting the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the issuance of the Exercise Shares, to
effect a conversion of the Series G Shares and/or otherwise to comply with the
terms of this Agreement, the Company will forthwith take such corporate action
as may be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes. The
Company will obtain any authorization, consent, approval or other action by or
make any filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of the Exercise
Shares and the issuance of shares of Common Stock upon a conversion of Series G
Preferred in accordance with the Series G Certificate of Vote.
4.3. EQUITABLE REMEDIES. The Signatories acknowledge and agree that
any breach by any of them of this Agreement may cause the Company irreparable
harm which may not be adequately compensable by money damages. Accordingly, in
the event of a breach or threatened breach by any of the Signatories of any
provision of this Agreement, the Company shall be entitled, without posting any
bond or other security, to the remedies of specific performance, temporary,
preliminary and permanent injunctive relief and other equitable remedies,
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including the right to compel the breaching Signatories to surrender the stock
certificates in respect of their shares of capital stock in accordance with the
provisions of this Agreement, in addition to such other rights and remedies as
may be available to the Company for any such breach or threatened breach,
including but not limited to the recovery of money damages.
4.4. NOTICES. All notices, requests, consents and other
communications provided for or permitted hereunder shall be made in writing and
shall be delivered by hand-delivery, registered or certified first-class mail,
return receipt requested, or sent by telecopier or telex, addressed as follows:
(a) if to GE Capital Equity Investments, Inc. ("GE"), at its
address set forth on the signature pages hereto, with a copy to Xxxxxx, Xxxx &
Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000,
Facsimile: (000) 000-0000, Attention: Xxxxx X. Xxxxxx;
(b) if to a Signatory who is not GE, at the most current address
given by the Signatory to the Company in accordance with the provisions hereof,
which address initially is the address of the Signatory set forth on the
signature pages hereto; and
(c) if to the Company, initially at its address set forth on the
signature pages hereto and thereafter at such other address, notice of which is
given in accordance with the provisions hereof, with a copy to Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Facsimile: (000) 000-0000, Attn: Xxxxx Xxxx.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five (5)
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
4.5. FURTHER ASSURANCES. The parties hereto shall execute and
deliver such other documents, certificates, agreements and other writings and
shall take such other actions as may be reasonably necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
4.6 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
together with the all exhibits hereto, constitutes the entire understanding and
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, modification or other
amendment or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
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4.7 CAPTIONS. The captions herein are for convenience of reference
only and are not to be considered in construing this Agreement. All references
to an Article or Section include all subparts thereof.
4.8 COUNTERPARTS. This Agreement may be executed by facsimile in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
4.9 SEVERABILITY. Should any provision of this Agreement be
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
* - * - *
REST OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year herein above first written.
COMPANY:
PrimeSource Healthcare, Inc.
By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
SIGNATORIES:
GE Capital Equity Investments, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Xxxxxxx Xxxxxxx Xxxxxxx Xxxxx IV L.P.
By: Its General Partner
CSHB Ventures IV L.P.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: General Partner
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxx 00000-0000
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By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Webbmont Holdings, L.P.
By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
Title: President of General Partner
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Investors Equity, Inc.
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
By: /s/ Xxxxxx Xxxxx Xxxxxx
-------------------------------------
Xxxxxx Xxxxx Xxxxxx
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
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EXHIBIT A
Form of Warrant
1
EXHIBIT B
Form of Skadden Opinion
1
EXHIBIT C
Series G Certificate of Vote
s 1
